Daily Report

Hong Kong stocks down again on slowing growth in mainland China services sector

Mainland China indices eke out small gains

PUBLISHED : Thursday, 05 May, 2016, 9:56am
UPDATED : Thursday, 05 May, 2016, 5:47pm

Mainland Chinese and Hong Kong stocks closed flat on Thursday after trading within a narrow range, as a private gauge of mainland services activity indicated the new economic engine grew more slowly last month.

The mainland’s benchmark Shanghai Composite Index swung between minor gains and losses to close 0.22 per cent or 6.57 points higher at 2,997.84. The CSI 300, which tracks large companies listed in Shanghai and Shenzhen, inched up 0.14 per cent or 4.46 points to 3,213.92.

The Shenzhen Composite Index edged up 0.72 per cent to 1,942.54, and the Nasdaq-style ChiNext Index traded flat at 2,224.09.

The services sector is where we need to see robust employment growth
Elliot Clarke, Westpac Bank

In Hong Kong, stocks stayed in negative territory for a fourth consecutive session, but managed to recover lost ground after a substantially lower opening in the morning. The Hang Seng Index closed 0.37 per cent lower, shedding 76.01 points to 20,449.82. The Hang Seng China Enterprises Index, which comprises mainland companies listed in Hong Kong, fell 0.81 per cent to close at 8,626.73.

Hong Hao, head of research at Bocom International, said investors were unwilling to trade without clear cues from the market.

“[The markets] are trendless today,” he said.

Hong said the release of the Caixin services purchasing managers’ index (PMI) figures on Thursday, which were slightly below expectations, gave investors some reason for hesitation.

The index, which reflects sentiment in consumer sectors such as real estate and retail, came in at 51.8 in April, down from 52.2 in March. It remained above the 50-mark separating expansion from contraction, but was an indication of moderating growth.

The official services PMI, released over the weekend, fell to 53.5 in April from 53.8 in March.

“The services sector is where we need to see robust employment growth, in the short term to offset weakness in manufacturing employment, and in the long term to see rising wages and increased productivity. Yet this is not occurring,” said Elliot Clarke, senior economist for Sydney-based Westpac Bank, in a recent research note.

“Of material concern, the ‘new business’ measure (official services PMI) fell back to its Jan/Feb lows in April (3.9 points below average), as export orders slumped back to their lowest level since mid-2009.”

Shanghai-listed airline stocks bucked the weak trend, after the State Council, China’s cabinet, pledged to speed up the development of the aviation industry and open up low-altitude air space.

Budget carrier Spring Airlines jumped 7.65 per cent to 53.50 yuan (HK$63.90), Juneyao Airlines surged 7.55 per cent to 31.90 yuan and China Eastern Airlines rose 3.26 per cent to 6.97 yuan.

In Hong Kong, most sectors fell, with mining and oil and gas shares leading the losses.

Shares of banking giant HSBC tumbled to a 10-day low, declining 1.4 per cent to HK$49.45 at the close, after its private banking unit appealed a fine of HK$605 million by Hong Kong’s securities regulator in regard to the bank’s sale of structured products between 2003 and 2008.

Additional reporting by Laura He